Cyprus talks continue as EU deadline looms

Ailing economy to vote on new measures aimed at staving off financial meltdown and reaching European bailout terms.

Cyprus faces its most critical hours in recent history as it attempts to save its economy from bankruptcy, desperately bidding to rescue an EU bailout by a Monday deadline.

Facing an imminent threat of financial meltdown, MPs are expected to debate a controversial one-off tax on large deposits to help the country qualify for the European lifeline.

MPs voted in three bills late on Friday evening as protestors faced off with riot police outside parliament, approving measures aimed at raising $7.47bn to qualify for $13bn in rescue loans or face being denied European Central Bank emergency funds.

"It's make or break time for Cyprus and its ailing banks," said Al Jazeera's Jonah Hull, reporting from Nicosia. "Another vote will be held this weekend to impose a one-off tax on large deposits."

Measures agreed on so far include a national solidarity fund to be set up through the nationalisation of public and private sector pensions, financial restrictions to prevent a run on the island's troubled banks when they are finally due to open on Tuesday after a more than week-long break, and a restructuring plan for the banking sector drawn up by the central bank.

The restructure, considered the biggest step to date, would separate good debts from bad in troubled banks, particularly second largest lender Popular Bank, or Laiki in Greek.

With the clock ticking down to the crunch Sunday meeting with eurozone finance ministers, MPs will likely first be debating the tax of up to 15 percent on bank deposits of 100,000 euros ($129,000).

Earlier on Tuesday, MPs had flatly rejected the levy when it was presented in a slightly different form.

"Currency controls mean that the euro inside Cyprus now is a very different currency than it is outside, because you can't get it out of the country," Ann Pettifor, director of Prime Economics, told Al Jazeera. "That's designed to keep the Russian money in the country."

When the banks open, large depositors were "going to get their money fast, but now they won't be able to do that," she said.

Al Jazeera's Hull said: "On Saturday, they will talk about bank deposit taxes, resurrecting the idea that was rejected on Tuesday night.

"But with a key difference, small savers' deposits will be protected. It will be the rich who will be hit, possibly twice, because they will also be bailing out the bad banks. Of course that means, rich Russian depositors back in the eye of the storm."